Annual Report 2006 - CHAPTER 3 Public procurement and state aid

Face - Contents - Bottom - Previous/Next

"Annual Report 2006"

CHAPTER 3
Public procurement and state aid

3.1 Public procurement in 2006

2006 has proven to be an interesting year in terms of public procurement. In the next sections a few of the important events and challenges the Danish Competition Authority has dealt with during the year are described.

Firstly, as mentioned previously in chapter 1 the Danish Government has envisioned its ambitious Globalisation Strategy for increased competition in Denmark. One of the aims is to increase the volume of public procurements, regardless of the EU thresholds, as the public sector is a major player on Danish markets.

Secondly, the remedies directives have been on the agenda.

Thirdly, the practice as laid down by the European Court of Justice regarding a stand still period after the execution of a public procurement procedure has been implemented in Denmark.

Fourth and finally, the Danish Competition Authority has finished 42 complaint cases concerning possible infringement of the public procurement legislation. In addition to this a total of 96 informative statements have been issued from the Danish Competition Authority.

Denmark has implemented directives 2004/17 and 18 EC completely. In addition to the requirements in the directives, contacting authorities are required

• To ask for a solemn declaration on the size of public debts the tenderer has. As a main rule a contracting authority cannot sign contracts with a tenderer that has a debt of more than 100.000 DKK to the public.
  
• To inform the tenderes where to obtain information regarding taxes, environmental issues and working environment.

3.2 Public procurement and thresholds

The Government’s Globalisation Strategy focuses on increasing the competition on the Danish markets. One of the initiatives in this strategy is to introduce a set of thresholds for when public entities are required to publish planned acquisitions be it goods or services. The threshold equals approximately 67,000 EUR. Whenever the contract value of the acquisition reaches the EU thresholds the EU rules engage. A major adjustment to the current rules is that the obligation to publish a planned acquisition applies to both Annex II A and B services. Since the strict procedural rules in the EU directive only apply to Annex II A services, the new rules requires publication of the Annex II B services as well, as soon as the 67,000 EUR threshold is reached.

The new rules – as part of the amendments to the Danish Competition Act mentioned previously in chapter 2 – have been put forward in Parliament in February 2007 and are expected to come into force by 1 July 2007.

3.3 The remedies directives

In May 2006 the EU Commission proposed a revision of the remedies directives. The aim of the proposition is to strengthen the national complaint bodies in terms of remedies for possible infringements of the public procurement rules.

One of the initiatives discussed – and agreed upon – was the introduction of a stand still period. The stand still period refers to the period from when the winning tenderer has been identified until the time when the contract can be signed.

Another initiative is to combat illegal direct award of contracts.

The EU Council has considered the proposal since May 2006, and the proposition is currently being debated in the EU Parliament. The EU Parliament is expected to present a position in April 2007 and the German chairmanship is expected to work towards an agreement before it steps back by mid 2007.

3.4 Stand still period in Denmark

From 1 October 2006 a governmental order has introduced a formal set of rules that will secure that practices from the European Court of Justice in terms of stand still are implemented in Denmark.

The order consists of two elements. First of all Danish official bodies is required to ensure a simultaneous notification to bidders and interested parties whenever a decision on contract awards are made.

Secondly, a stand still period has been introduced that requires the contracting authority and the winner of the tender to postpone the signing of the contract for limited period of time.

The stand still period is defined as 10 days calculated from the time of the notification to all of the bidders.

To ensure the knowledge of this clarifying set of rules the Danish Competition Authority has issued a brochure that explains why and how the contracting authorities must handle the stand still period.

3.5 Complaint cases and informative statements

Whenever a tenderer has reason to believe that a contracting authority has violated public procurement legislation, a complaint can be submitted to the Danish Competition Authority.

The complaint system offers the plaintiff an easily accessible, rapid and inexpensive way of dealing with the procurement problems. On receipt of a complaint, the Danish Competition Authority contacts the contracting authority in question, examines the case and presents solutions for potential violations. In the majority of the cases, this results in the infringements being remedied and the contracting authority complying with the rules.

The statements made by the Danish Competition Authority have no judicially binding effects. They cannot be appealed and the party the statement goes against is not obliged to obey the statement. As such this informal complaint setup is very different from the courts. If the violation is big enough the Danish Competition Authority may consider bringing the case to the Complaints Board for Public Procurement which is the formal court-like complaint body. A plaintiff may decide to bring a case before the Complaints Board without the support of the Danish Competition Authority if he so wishes.

The Danish Competition Authority rarely deals with cases where a contract has already been signed and it never deals with claims for damages.

In 2006, the Danish Competition Authority issued recommendations in 42 complaint cases. The average handling time from reception of the case to closing the case was 72 days.

Number of complaint cases sorted by handling time

Written informative statements are limited to questions of general interest concerning law interpretation. The Danish Competition Authority has finished 96 statements in 2006.

Average duration of case handling 2002–2006, Procurement (days)

Informative statements sorted by cases handling time

In addition to the informal problem solving system, the Competition Authority is responding promptly to procurement questions submitted by the contracting authorities, tenderers and advisors via a telephone hotline service.

3.6 Two cases on public procurement

Pre-procurement counseling

In one case the Danish Competition Authority received a complaint over a regional municipality, M, after the completion of a public procurement procedure. The plaintiff argued that a specific tenderer, A, should be excluded from tending, since A had helped M specifying the requirements for the procurement.

A had prior to the public procurement procedure produced a number of sketches as a part of the documentation for the procurement. In order to produce the sketches, A had devised a hydraulic model for the calculation and projecting. The model was not available to the other tenderes since it was made by and for A itself.

The rule in question was therefore the principle of equal treatment.

The Danish Competition Authority initially stated that the contracting authority must uphold the principle of equality. When a contracting authority prior to a public procurement procedure has received counsel from an entity that later on is a tenderer, this entity must be disqualified if the initial counsel has resulted in a competitive advantage that preclude equal treatment of the other tenderers.

After deliberating the facts in the case the Danish Competition Authority stated, that the description of the procurement was not designed for A alone. Secondly A had not been a part of the determination of the selection or award criteria. Thirdly the contracting authority had issued a prior information notice and by this informed all interested parties of the public procurement as early as possible.

Regardless of this the Danish Competition Authority concluded that the projecting models must be considered part of the project as a whole. For this reason A had achieved a competitive advantage over the other tenderes that constituted an infringement of the principle of equality.

In the case a question was also raised concerning the assessment model used by M. The assignment should be awarded to the tenderer with the economical most advantageous tender. In addition to “price” M had decided to assess the tenders in relation to three qualitative criteria. The relative weighting was however only stated for the three qualitative criteria – not the price.

This assessment model was considered dubious as the directive art. 53(2) states that the contracting authority must specify the relative weighting between the criteria applied for finding the economically most advantageous tender. The Danish Competition Authority therefore recommended that M refrained from using this assessment model in the future.

Informative statement on possibility to request samples from tenderers

In another case the Danish Competition Authority was asked for an informative statement on to what extent the contracting authority can demand samples in a public procurement of medical equipment.

The request was submitted by the industrial organization MedicoIndustrien. MedicoIndustrien could tell of cases where tenderers were asked to deliver samples valued at EUR 19,000. Despite these high costs the tenderers could not expect to reuse the samples or to be compensated for the cost after the public procurement procedure was finished.

The Danish Competition Authority stated initially that according to the directive art. 48(2)(j)(i) samples can be requested when the contract concerns product supply and for the assessment of the technical abilities of the operators.

It was furthermore stated by the Danish Competition Authority that although it does not appear explicitly in the directive the contracting authority must be able to ask for samples for the purpose of awarding the contract as well.

When a contracting authority makes a request for samples it must conform to the general principles that derive from the EC Treaty. In this situation it is the principle of proportionality in particular that is in question.

When assessing if this principle is upheld the contracting authority must consider the suitability, the necessity and the width of the request for samples for the purpose of awarding the contract.

For this reason the Danish Competition Authority stated that whether a request for samples is in accordance with public procurement law is a specific assessment, and a request for very expensive samples could well infringe the principle of proportionality.

3.7 State aid

In line with the Commission’s increased focus on state aid, Denmark has in 2006 made preparations for the  establishment of a governmental advisory committee on state aid – the State Aid Committee. The committee consists of the Ministry of Justice, the Ministry of Foreign Affairs, the Ministry of Finance and the Ministry of Economic and Business Affairs as well as the ministry seeking advice from the committee. From the beginning of 2007 the Danish Competition Authority works as the committee’s secretariat and performs the initial evaluations and assessments of the initiatives.

In connection with the committee, procedural steps have been taken to ensure that all new legislation will be sent to the Danish Competition Authority. Thus, all new legislative steps that might encompass state aid have to be presented to the committee which gives its opinion and advice on the legislation. The set up obliges all ministries to consult the secretariat before adopting new legislation that could involve state aid. The ministry responsible for the legislation remains responsible for the correct application of state aid rules and procedures.

Not only are ministries obliged to consult the committee they also receive substantial benefits from the setup. All levels of the central administration can obtain advice and service on state aid assessment, they can have all new legal drafts screened and assessed, advice and service in relation to contacting the Commission services can be obtained, and ministries can obtain advice and service on notification through SANI and the herewith related procedures. The secretariat has also produced a manual on state aid for case handlers.

As the set up requires early considerations on state aid, even in the design stage, the structure should prevent the emergence of cases regarding unlawful and not notified state aid in Denmark in the future.

The work of the State Aid Committee has in the first three meetings consisted of giving advice on 8 cases of a certain volume on state aid, and the committee has discussed state aid policy initiatives and caselaw from the European Court of Justice. In addition to this the secretariat has informed the committee on a number of smaller cases that the secretariat has assisted ministries with within the first four months of 2007.

Version 1.0 May 2007 • © Danish Competition Authority.
Published by the Danish Competition Authority, http://www.ks.dk/
Publication produced according to the standard for electronic publication set by the Government